Apple's Portion of Overall Value of the Nasdaq: 12%

By Simeon Hyman and Karl Cates | May 23, 2012

What's Happening

If you want to invest broadly in the U.S. technology sector, conventional wisdom says one way to do it is to buy a fund that tracks the Nasdaq Composite Index. You might not be getting the broad tech-sector exposure you think, however. Roughly 12 percent of the Nasdaq's valuation comes from the stock of one company: Apple. Put another way, if you were to invest $1,000 in the PowerShares QQQ Trust -- which tracks the Nasdaq and is the third-most-traded ETF in the world -- you'd effectively be putting $120 of that $1,000 into Apple.

Photograph by Chris Ratcliffe/Bloomberg

Why It Matters

Apple has performed well over the long haul, but it hasn't been a steady ride. While the stock gained 26 percent in 2011, it has lost 14 percent of its value since mid-March. It hasn't always accounted for such an outsized piece of the Nasdaq. A year ago, according to data compiled by Bloomberg, Apple represented 7 percent of the index's market value. Three years ago, it was 4.4 percent (behind Microsoft), and five years ago it was 2.5 percent. That was when Microsoft, Cisco, Intel, Google and Oracle ranked ahead of Apple in their share of index value.

Graphic by Charlos Gary/Bloomberg

What It Means for Your Portfolio

Apple has returned almost 5,000 percent to shareholders over the past 10 years. In the wake of such performance, "Apple needs to smash records to keep momentum," Colin Gillis, an analyst at BGC Partners, said in April. And it's not the first time one stock has so influenced the Nasdaq. In January 2002, Microsoft accounted for 12.3 percent of the Nasdaq. A year later it was up to 15.75 percent. How much will the tech stock of the day, Facebook, affect the index? Not much yet, since Facebook made just 8 percent of its stock available to the public.